District Court Finds That Plaintiff Waived Right To Pursue ERISA Claim Through Separation Agreement With Employer

In Schuyler v. Sun Life Assurance Co. of Canada, No. 20-CV-10905 (RA), 2023 WL 2388757 (S.D.N.Y. Mar. 7, 2023), New York District Judge Ronnie Abrams granted Sun Life’s summary judgment motion finding that Plaintiff knowingly and voluntarily waived her right to pursue an ERISA claim against her employee welfare benefit plan through the Separation Agreement she signed with her employer.

Plaintiff was employed at Benco Dental Supply Company as a Territory Sales Representative. On May 31, 2019, she submitted a claim for LTD benefits alleging she was suffering from confusion, difficulty with concentration, memory problems, mental and physical fatigue, sleep problems, sensitivity to noise, and sensitivity to light resulting from a traumatic brain injury she sustained in September 2015. Sun Life denied the claim on October 17, 2019 stating, in part, that the information it had received was insufficient to demonstrate total disability under the policy.

On December 19, 2019, between the time that Sun Life had denied her initial claim for LTD benefits and her appeal on January 14, 2020, Plaintiff entered into a Separation Agreement and Release with her employer. The Agreement stated: “Employee of her/his own free will, voluntarily releases … any and all known and unknown actions … arising out of or in any way connected with Employee’s employment with Benco … including, but not limited to, any alleged violation of … the Employee Retirement Income Security Act of 1974 (‘ERISA’).” When Sun Life upheld the LTD denial on appeal, Plaintiff filed suit.

The Court agreed with Sun Life’s argument that Plaintiff waived any legal claims she may have had under ERISA through the Separation Agreement she signed with Benco. The factors considered when determining if a plaintiff waived her ERISA claims knowingly and voluntarily consist of: (1) the plaintiff’s education and business experience; (2) the amount of time the plaintiff had possession of or access to the agreement before signing it; (3) the role of the plaintiff in deciding the terms of the agreement; (4) the clarity of the agreement; (5) whether the plaintiff was represented by or consulted with an attorney; and (6) whether the consideration given in exchange for the waiver exceeds employee benefits to which the employee was already entitled by contract or law. See Laniok v. Advisory Comm. of Brainerd Mfg. Co. Pension Plan, 935 F.2d 1360, 1368 (2d Cir. 1991).

The Court found that these factors weighed decidedly in Sun Life’s favor. Plaintiff was a well-educated individual with a bachelor’s degree in business administration and marketing, and extensive business experience. She managed a territory of over 250 dentists for her employer, and she also worked as a real estate agent from 2016 to 2020. Plaintiff had possession of the Agreement for 20 days before signing it, and the Agreement also contained an additional right to revoke period of 7 days after execution. Plaintiff personally negotiated an increase in the Agreement’s compensation and negotiated other terms, including an extension of her health insurance coverage and mutual non-disparagement language. The Agreement stated in two separate places that it released any claims under ERISA. Although Plaintiff did not retain an employment attorney to review the Agreement, she did have her disability attorney review it to “make sure it did not harm my LTD and SSD claims.” Thus, there was no indication that Plaintiff was denied the opportunity to consult with an attorney about her rights under the Agreement. As for the sixth factor, Plaintiff received $25,000 in compensation from the Agreement, but asserted (without any support) that her present claim was worth approximately $1.2 million. The Court noted that at least one court has declined to consider the value of the ERISA claim presently being litigated when weighing the sixth factor. Regardless, it concluded that even if it were to consider the potential benefits that Plaintiff would be entitled to if she were to prevail in the litigation, that factor alone did not overcome the clarity of the Agreement or the fact that Plaintiff consulted her disability attorney before signing it.

The Court rejected Plaintiff’s additional arguments: (1) that she sought confirmation from her employer that the Agreement would not affect her ability to appeal the Sun Life claim … the Court found it did not, and Plaintiff was afforded an appeal (an appeal is distinct from an action in federal court); (2) that she only signed the Agreement based on assurances that it would not limit her ability to receive disability benefits … the Court found such self-serving statements made after the fact did not overcome the Laniok factors; and (3) that Sun Life was not a released entity under the Agreement … the Court concluded that Sun Life was a “party-in-interest” as defined under ERISA and within the meaning of the Agreement.

As this case demonstrates, the terms of severance and/or separation agreements entered with your employer can affect the validity of your disability claim. If you are navigating both a separation from your employer and a disability insurance claim, contact us for assistance.